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The Ski Pro Corporation, which produces and sells to wholesalers a highly successful line of water skis, has decided to diversify to stabilize sales throughout the year. The company is considering the production of cross-country skis.After considerable research, a cross-country ski line has been developed. Because of the conservative nature of the company management, however, Minnetonka’s president has decided to introduce only one type of the new ski for this coming winter. If the product is a success, further expansion in future years will be initiated.The ski selected is a mass-market ski with a special binding. It will be sold to wholesalers for $80 per pair. Because of availability capacity, no additional fixed charges will be incurred to produce the skis. A $100,000 fixed charge will be absorbed by the skis, however, to allocate a fair share of the company’s present fixed costs to the new product.Using the estimated sales and production of 10,000 pairs of skis as the expected volume, the accounting department has developed the following cost per pair of skis and bindings:Ski Pro has approached a subcontractor to discuss the possibility of purchasing the bindings. The purchase price of the bindings from the subcontractor would be $5.25 per binding, or $10.50 per pair. If the Ski Pro Corporation accepts the purchase proposal, it is predicted that direct-labor and variable-overhead costs would be reduced by 10% and direct-material costs would be reduced by 20%.Create a spreadsheet that answers the following questions:1.Should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer.2.What would be the maximum purchase price acceptable to the Ski Pro Corporation for the bindings? Support your answer with an appropriate explanation.3.Instead of sales of 10,000 pairs of skis, revised estimates show sales volume at 12,500 pairs. At this new volume, additional equipment, at an annual rental of $10,000 must be acquired to manufacture the bindings. This incremental cost would be the only additional fixed cost required even if sales increased to 30,000 pairs. (This 30,000 level is the goal for the third year of production.) Under these circumstances, should the Ski Pro Corporation make or buy the bindings? Show calculations to support your answer.4.What qualitative factors should the Ski Pro Corporation consider in determining whether they should make or buy the bindings?
Suppose the given statement by a financial manager: "Since we are financing our new manufacturing facility 100 percent with equity, we must estimate it using a higher rate of return than we would if we financed a portion of the facility with debt."
Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 24% for two years and then at 4% thereafter. If the required return for Deployment Specialists is 9.0%, what is the intrinsic value of Deployment Specialists ..
1. define the hedging principle. how can this principle be used in the management of working capital?2. there are three
Today's electronics specializes in manufacturing modern electronic components. It also builds the equipment that produces the components. Phyllis Weinberger.
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About 67% of the acquisitions of other companies result in losses to the acquiring firms stockholders. Since it is well documented that most acquisitions are financial failures, why do firms continue to purchase other firms?
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